Consolidated Rutile v China Weal [1998] QSC 170

The company may not, without leave, oppose the application on either of the grounds referred to in its notice since they go to the question of whether there is a debt presently due and payable, s.459S(1) of the Law. The court may only grant leave to the company to argue these grounds to set aside the application to wind up if it is satisfied that the ground is material to proving that the company is solvent, s.459S(2). The question whether US$1,639,050 is a debt presently due and payable is central to the issue of whether or not the company is solvent. If the amount the subject of the statutory demand is found to be a debt due and payable the company admits that it would properly be regarded as insolvent. In that circumstance, counsel for CRL, Mr J Bond, did not oppose leave being given.

The issue is whether on the proper construction of cl.B(i) of the terms and conditions of the contract between the company and CRL the price for the goods the subject of the contract became due and payable such as to entitle CRL to payment of the price contracted for even though the goods had not been delivered, the title remained with CRL and the goods had not been appropriated to the contract.

CRL and the company entered into contract No.96Z066 dated 16 April 1996 wherein CRL agreed to sell to the company 3000 metric tonnes of zircon sand. By cl.2 "A total quantity of 3,000 tonnes of Zircon Sand will be shipped in bulk during the period July-December 1997". By cl.4(i) the agreed price for shipment of the total 3000 tonnes of zircon was AUD 700 per tonne FOB Brisbane. By cl.4(ii) that price was to be converted to a United States dollar price "on 15 January 1997 using the Hedge Settlement rate for that day". Title for the goods passed to the company upon payment. Payment was agreed to be made by an irrevocable letter of credit established by the company and payable 45 days from the bill of lading date and raised on a bank acceptable to CRL in its favour and advised 14 days prior to the expected date of shipment, cl.5. By cl.B(i) of the terms and conditions:

"If the Buyer revises the shipping schedule as agreed pursuant to CLAUSE 2 of this Contract, the Seller may invoice the Buyer for the appropriate tonnage of Zircon Sand not shipped as per the originally agreed schedule. [T]hereafter payment becomes due 28 days after the invoice date. Storage, insurance and any other holding charges incurred by the Seller will be invoiced to the Buyer monthly, until the final quantity of Zircon Sand is shipped. All charges pursuant to this Clause are payable to Seller 14 days after invoice."

None of the zircon the subject of the contract was shipped between July and December 1997.

Mr Xiaowu Wu, a director of the company, deposes in paragraph 7 of his affidavit filed 14 August 1998 that on 8 December 1997 he "offered" Kevin Ross, the sales manager, for China for CRL:

"... a variation of the terms which included the following:-

(a) shipment would be deferred until the end of May 1998; and

(b) the letter of credit would be opened at the exchange rate applicable 14 days ahead of shipment (which had always been our practice).

Kevin Ross said to me that, on behalf of CRL, he accepted the deferral and would consider the exchange rate question."

In paragraphs 3 and 4 of Mr Wu's affidavit filed 21 August 1998 he deposes:

"3. At that meeting [8 December 1997] the shipping date for 3000 tonnes of zircon pursuant to a Contract No. 96Z066 between China Weal and CRL was discussed. No actual shipping schedule had been agreed for the period July to December 1997.

There was some suggestion by Mr Gynther for the company that the parties had a mutual agreement to vary the shipping date, however a perusal of the correspondence which followed the meeting on 8 December exhibited to Mr Wu's affidavit of 21 August makes it clear that no such agreement had been reached between the parties. Mr Gynther conceded that it could be assumed that the shipping schedule had been revised. Under cover of a letter dated 2 January 1998 CRL enclosed an invoice to the company dated 31 December 1997 for:

Shipment scheduled for December 1997 and not Lifted

[AUD700.00 @ Hedge Settlement Rate on 15 January 1997 of 0.7805 as per Clause 4.ii of Contract]

The total price is USD1,639,050 and the payment terms are set out as "full invoice value by telegraphic transfer within 28 days after invoice date [payment due by 28 January 1998] in favour of Consolidated Limited ...". This invoice was received by the company in early January 1998.

In Australian and New Zealand Banking Group Limited v Cawood [1987] 1 Qd R 131 Williams J concluded at p.134 that a claim for a debt in foreign currency could properly be regarded as a claim for a "debt or liquidated demand in money" pursuant to RSC 6 r.7(a) and could be the subject of special endorsement and thus of a summary judgment application where the contract specifically provided for [re]payment in foreign currency. See also European Asian Bank AG v Katsikalis [1988] 1 Qd R 45 and Foti v Banque Nationale de Paris (No.1) [1989] SASC 1318; (1989) 54 SASR 354.

It is necessary to consider if s.50(2) of the Sale of Goods Act 1895 is determinative of this matter or whether CRL has other rights at law to sue for the price and whether in either event the words used in the contract are apt to characterise the demand as a debt due and owing.

Section 50(2) of the Sale of Goods Act 1896 provides:

"When, under a contract of sale, the price is payable on a day certain irrespective of delivery, and the buyer wrongfully neglects or refuses to pay such price, the seller may maintain an action for the price, although the property and the goods has not passed, and the goods have not been appropriated to the contract."

A number of authorities establish that this provision (or its analogue) requires that the time specified in the contract should not depend on a future contingent event, Pordage v Cole (1607) 1 Wms' Saunders 319; 85 ER 449; Dunlop v Grote [1845] EngR 1197; (1845) 2 Car & K 153; 175 ER 64 per Cresswell J at p.65 (this decision is said by Benjamin, 5th ed (1997) at para 16-022 to be the basis of s.50(2); Shell-Mex Ltd v Elton Cop Dying Co Ltd (1928) 34 Com Cas 39; Muller, Maclean & Co v Leslie and Anderson (1921) 8 Ll L R 328.

Benjamin concludes at 16-024 that a day can be certain under s.50(2) only if it is fixed in advance by the contract in such a way that it can be determined independently of the action of either party or of any third party. At 19-186 the learned author suggests:

"This subsection was probably intended to apply only to cases in which a date for payment was either specifically mentioned in the contract of sale or ascertainable at the time of the contract."

The provision in the contract which enables CRL to invoice the company should the shipping schedule be revised and, if it does so, require payment in 28 days does not establish a day certain. The day is uncertain, governed by the decision of CRL whether and when to invoice. Accordingly, CRL has no entitlement under s.50(2) of the Sale of Goods Act to sue for the price.

If there is no entitlement at common law to sue for the price CRL cannot succeed on its application being limited to an action for damages for breach of contract. There is some authority for the proposition that s.50(2) is exhaustive of a seller's right to sue for the price other than in the circumstances provided for in that section (s.50(1) which permits suit where property in the goods has passed is not here relevant because under the terms of the contract property does not pass until the price is paid). See Colley v Overseas Exporters [1921] 3 KB 302 at 310; Stein Forbes & Co v County Tailoring Co (1916) 86 LJKB 448; Martin v Hogan [1917] HCA 75; (1917) 24 CLR 234 per Isaacs and Rich JJ at 261-2, per Higgins J at 266-7 (all dissentients); Plaimar Ltd v Water Trading Co Ltd [1945] HCA 34; (1945) 72 CLR 304 at 318. Section 61(2) of the Sale of Goods Act expressly saves "the rules of the common law ... to contracts for the sale of goods" save in so far as they are inconsistent with the express provisions of the Act. All of the above authorities recognise that the parties can make any contract they care to in regard to the payment of the price and an action can be maintained for the price if the contract expressly or impliedly provides for such an action. This is the effect of the decision in Minister for Supply and Development v Servicemen's Co-Operative Joinery Manufacturers Ltd [1951] HCA 15; (1951) 82 CLR 621. The buyers had physical possession of goods as bailees, as the court found, and, in due course, offered to buy them from the seller. The seller's letter of acceptance (or counter-offer, which was subsequently accepted) included the stipulation "Net cash before delivery" and the amount was set out. The buyer did not pay the amount due. The terms clearly excluded the ordinary rule that payment and delivery are concurrent conditions and made payment a condition precedent to delivery. The seller was only bound to deliver after the price had been paid. The major aspect of the appeal was whether property had passed at any time to the buyer and that need not be considered here. Latham CJ said at p.636: "The price may be payable at a time before the delivery and an action for the price may then be maintained though the property has not passed". Williams J said at p. 642:

"But the parties can make any contract they please with respect to the payment of the price and if they provide that it is to be paid before the property passes, the seller can sue for the price as soon as it becomes payable, for the payment of the price is a condition precedent to the passing of the property. Usually such a contract provides for the payment of the price on a day certain, but in the present case no day of payment is fixed. The purchase price would therefore have to be paid within a reasonable time. If it was not so paid it would become a debt for which the Commonwealth, [the plaintiff] could sue although the property in the wood-working machinery and equipment had not passed to the society."

Webb J agreed that the appeal should be allowed but could see nothing in the agreement for sale which would enable the seller to recover the price before delivery. He said at p. 643:

"It is true that a vendor and purchaser can make what agreement they like; but here they say nothing about the right to recover the price before delivery. Payment before delivery is provided for, but the question is whether that gives the right to recover the price before delivery."

His Honour, referring to a passage from the 1893 edition of Chalmer's Sale of Goods concluded that under the old counts of indebitatus there were two circumstances under which the price of goods sold could be recovered, namely, where goods were sold and delivered and property had passed and where there was a bargain and sale and property had passed but no delivery had occurred and delivery was not a condition precedent to the price. His Honour concluded that the equivalent of s.50(2) was the only additional situation in which the seller could sue for the price if the contract appointed a certain day for the payment. Provision for payment before delivery was intended in that case, he thought, to do no more than make delivery conditional upon prior payment. This was the approach of McCardie J in Colley v Overseas Exporters, ibid.

It is clear that none of the judgments deny the parties the right to agree that the price may be recovered prior to delivery or the passing of title. The point of departure appears to be whether the contract will support an entitlement to action. The provisions in the Sale of Goods Act are clear - "the seller may maintain an action for the price". Such a clear expression of intention is rarely to be found in agreements inter partes. The learned author of Benjamin states at p.848 note 83 that the terms of the contract must permit the seller to recover the price by action and not merely specify when the price is payable: the buyer's duty to pay the price is not identical with the seller's entitlement to sue for the price.

In respect of this contract the parties agreed that the zircon would be shipped during July to December 1997. This required CRL to have available the product for loading. Clause 3 of the contract concerns the details for shipment. Under it the company is obliged to charter the vessel for carrying the product and to advise CRL which must then approve the vessel before finalisation of the charter. The company is required to advise CRL of the quantity to be loaded and to require the vessel to give proper notice of its readiness to load. The availability of the letter of credit for payment is to be advised 14 days prior to the expected shipment and payable 45 days from the date on the bill of lading. The date of the bill of lading is to be advised to the company by facsimile by CRL on completion of loading. The effect is payment linked to delivery. Clause B(i) appears after those provisions and concerns non-performance of the agreement insofar as the shipping schedule is concerned. If the shipping schedule is revised by the company CRL may change the method of payment for the product. It may invoice the company for the zircon not shipped and thereafter payment becomes due 28 days later. Holding charges incurred by CRL (after the original shipping schedule period has expired) are to be invoiced by CRL to the company until all the zircon has been shipped and those charges are payable 14 days after invoice. The conclusion is clear that the parties intended that all of the zircon was to be shipped by the 31 December 1997 and that if it was not, because the company had revised the shipping schedule, CRL was entitled to be paid before loading the zircon. The more difficult question is whether the parties agreed that CRL could sue for the price of the zircon it being implicit that at all times CRL was ready and willing to perform its part of the bargain. The reasoning of the High Court in Minister for Supply would suggest that cl.B(i) does have that effect. It is quoted in Benjamin at 16-025 and Sutton Sales and Consumer Law 4th ed (1992) as authority for that proposition without criticism. See also Style Finnish (Qld) Pty Ltd v Ablong Security Pty Ltd [1994] 2 Qd R 203. Once the parties agreed that payment was to be made 28 days after invoice when the shipping schedule had been changed the conclusion seems inevitable that they agreed that CRL could thereby sue for the price.

In that circumstance the amount due under the contract is a debt due and payable. The company is insolvent as it could not pay that amount.

The subsidiary point that a course of dealing between the parties would give rise to an implied term that the contract price was to be departed from and the margins split depending on movements in the market price for zircon cannot be sustained in face of the terms of the contract.

The company's application to set aside the statutory demand is dismissed.